Currency report

Press, 21 December 1981, Page 20

Currency report

Foreign exchange markets last week were dominated by political events, says the Bank of New South Wales in its weekly foreign exchange report. Firstly, President Reagan called for all U.S. residents living in Libya to leave that country in the face of worsening diplomatic relations between the two countries. The dollar firmed on the news but was then given a further boost with the weekend announcement of a state of emergency being declared in Poland as a result of the threatened strike action by the Solidarity free, trade union.

The dollar was heavily bought as the first markets in Asia opened on Monday,

with the German mark in particular suffering. However, profit taking and a review of the seriousness of the Polish situation caused the dollar to slide back to its Friday closing levels in New York.

Money supply figures announced in New York late on Friday showed a considerably larger than expected rise in the MIB measure for the week ending December 2 of S4OOOM. The news initially caused Eurodollar quotes to rise by up to one percentage point. However, expectations that economic statistics due for release late in the week will show a further worsening of the U.S. economy, brought the rates down from their highs although year end demand for dollars is expected to keep upward pressure on rates.

Sterling weakened on news that the Organisation of Petroleum Exporting countries agreed at a meeting in Abu Dhabi to lower the prices of some grades of their oil by between 20c and 70c a barrel from January 1. Continued intervention by the Bank of England is holding interest rates up and in the face of further U.K. industrial ‘ unrest, this is really one of the only factors propping the value of the pound iip in the exchange markets. The yen has maintained its weaker tone after the Bank of Japan’s decision to lower its discount rate from 6.25 to 5.50 per cent. The move was widely expected and there-fore-had little effect on the market.